Commentary: Electronics IP Industry – A May 2008 Update

Commentary:

Electronics IP Industry - A May 2008 Update


by Dr. Russ Henke and Dr. Jack Horgan
Henke Associates



In their September 2003, December 2003, February 2004, May 2004, August 2004, November 2004, February 2005, May 2005, August 2005, November 2005, February 2006, May 2006, August 2006, November 2006, February 2007, May 2007, August 2007, November 2007, and February 2008, Electronics IP Industry Commentaries, the authors examined the recent financial histories and future outlooks of the remarkable phenomenon of Electronics Intellectual Property (IP) providers, a niche that has emerged in its own right to claim a substantial amount of revenue in the world of Electronics Design Automation. We had arbitrarily selected eight (8) publicly-traded companies originally (then called the “Group-of-8” or “G8”), as representative of the current financial state of the Electronics IP industry. At the end of 2004, ARM completed its acquisition of Artisan Components, Inc., thereby reducing our “G8” to “G7”. Accordingly, in this May 2008 Commentary, we look at the financial performances of the “G7” Electronics IP vendors during the first quarter of 2008.

Group-of-7 ("G7"):

ARM Holdings plc
Ceva, Inc.
LogicVision, Inc.
MIPS Technologies, Inc.
MoSys
Rambus Inc.
Virage Logic Corporation
Cambridge, UK
San Jose, CA
San Jose, CA
Mountain View, CA
Sunnyvale, CA
Los Altos, CA
Fremont, CA


For the “G7” companies above, we assume that all of their revenues are Electronics IP sales and directly related IP services.



Recent Electronics IP News Highlights

On April 14, 2008 the Global Semiconductor Alliance (GSA, formerly FSA) released its CYQ4 2007/year-end 2007 Global Semiconductor Funding and Financials Report. Semiconductor revenue totaled $267.5 billion (B), with fabless and IDM revenue accounting for 20% and 80% of the 2007 semiconductor sales total, respectively.

The top 15 semiconductor companies (ranked by 2007 revenue) accounted for $158.4 billion, or 58% of total semiconductor revenue:


On April 30, 2008, HP Labs said that it proved the existence of a new EE element that was first described in a scientific paper 37 years ago. Called the memristor, short for "memory resistor," it might eventually make possible cell phones that retain memory, data centers that operate despite fluctuations in power, and computers that recognize and remember human faces and learn from experience.

The tiny particle is 5 nanometers thick and was described in a paper published in the latest issue of Nature by a team of four Hewlett-Packard researchers led by R. Stanley Williams, the founding director of HP Labs' Information and Quantum Systems Lab. It is said to be the fourth fundamental circuit - the other three being the resistor, the capacitor and the inductor. Commercialization of the memristor technology is likely years away.

“HP has been looking for technology to solve the current limitations of memory chips for several years,” said Leon Chua, a professor of electrical engineering at UC Berkeley. Chua laid the theoretical foundation for the memristor in a paper published in 1971.


On May 6, 2008, the Wall Street Journal reported that three of the biggest chip makers -- Intel Corp., Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. -- have agreed to push for a transition to a larger generation of silicon wafers that would start in 2012. Reuters added that Samsung said the cooperation "with top rivals" aims 'to develop next-generation bigger silicon wafers to boost efficiency in chip manufacturing." Samsung said that it would work with the other two companies "to help migration of manufacturing standards from the current 12-inch (300 mm) silicon wafers to 18-inch (450 mm) discs that would yield more than double the number of chips." Reuters also said that these companies "have been exploring the move to pizza-sized silicon wafers to help them grab market share as demand surges for gadgets such as Apple Inc.'s iPod."

On May 6, 2008 the UPI stated that Princeton University engineers "have created a method that rids microchips of tiny defects, possibly leading the way to smaller, more powerful nanometer-scale chips." The method, which is published in the journal Nature Nanotechnology, "involves quickly melting the structures on a chip and then guiding the resulting flow of liquid so that it re-solidifies into the desired shapes." Researchers said that this is possible "because natural forces acting on the molten structures, such as surface tension, smooth the structures into geometrically more accurate shapes." The research tem added that "more precise component shapes could help manufacturers build smaller and better microchips."

On May 7, 2008, the Wall Street Journal reported that Taiwan's High Tech Computer Corp. (HTC) recently unveiled the 'Touch Diamond,' a touch-screen smartphone to compete with Apple's successful iPhone. The Journal calls HTC "a little-known but fast-growing Taiwanese gadget maker," who's Touch line "has sold surprisingly well since its launch last June." The company was chosen to have "a role in Google Inc.'s initiative to produce a cell phone using software developed by the Web giant." Company officials "declined to give details on that phone, but said that work is 'on track' and that HTC expects to release it in the second half of this year." While "HTC is still significantly smaller than rivals like Apple," it "is one of a wave of Taiwanese companies dropping contract manufacturing to build their own brands, often becoming rivals to their former big-brand customers." The Journal describes HTC's performance as "surprising for a company that was founded just over a decade ago and that, until recently, was little known outside its industry."


How did the Electronics IP G7 perform in the First Quarter of 2008?

On the revenue front, Table 1 below reveals that the G7's combined Q1 2008 performance was $232 million, an increase of 4.3% from the $222 million in the first quarter of 2007, and increase of 2.9% from the $225 million in the fourth quarter of 2007.

On a year-over-year basis, MIPS was the percentage revenue growth leader at 43%, with Virage Logic close behind at 39% and CEVA in third place at 20%. Rambus and MoSys suffered falling revenues compared to the year ago quarter at -21% and -10%, respectively. On a sequential quarterly basis, Ceva was the percentage revenue growth leader at 22%. MoSys and Rambus quarterly revenue declined slightly relative to the previous quarter. All the other G7 IP vendors delivered single digit percentage revenue growth.


Figure 1 below provides a bar graph of each vendor's revenue for Q1 2007, Q4 2007, and Q1 2008 in sequence.

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